Economic Action Plan 2014 Act, No. 2

2014, c. 39

Annual Statutes

C-43 2 41 62-63 Elizabeth II 2013-2014

A second Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures

Economic Action Plan 2014 Act, No. 2

Economic Action Plan 2014, No. 2 2014 12 16 39 2014 90748

SUMMARY

Part 1 implements certain income tax measures proposed in the February 11, 2014 budget. Most notably, it

(

a) extends the intergenerational rollover and the lifetime capital gains exemption for dispositions of property used in farming and fishing businesses;

(

b) extends the tax deferral provision with respect to breeding animals to bees, and to all types of horses that are over 12 months of age, that are kept for breeding;

(

c) permits income contributed to an amateur athlete trust to qualify as earned income for RRSP contribution limit purposes, with an election available to taxpayers for up to a three-year retroactive application;

(

d) extends the definition split income to include income from a business or property that is paid or allocated to a minor child from a partnership or trust where a person related to the child is engaged in the activities of the partnership or trust to earn that income;

(

e) eliminates graduated rate taxation for trusts and certain estates with an exception for cases involving testamentary trusts whose beneficiaries include individuals eligible for the Disability Tax Credit;

(

f) eliminates the 60-month exemption from the non-resident trust rules;

(

g) allows an individual’s estate to carry back charitable donations made as a result of the individual’s death;

(

h) expands eligibility for the accelerated capital cost allowance for clean energy generation and energy conservation equipment to include water-current energy equipment and a broader range of equipment used to gasify eligible waste fuel;

(

i) adjusts Canada’s foreign accrual property income rules in order to address offshore insurance swap transactions and ensure that income from the direct or indirect insurance of Canadian risks is taxed appropriately;

(

j) better circumscribes the existing investment business definition in the foreign accrual property income regime;

(

k) addresses back-to-back loan arrangements involving an intermediary; and

(

l) extends the existing tax credit for interest paid on student loans to interest paid on a Canada Apprentice Loan.

Part 1 also implements other selected income tax measures. Most notably, it

(

a) alleviates the tax cost to Canadian-based banks of using excess liquidity of their foreign affiliates in their Canadian operations;

(

b) ensures that certain securities transactions undertaken in the course of a bank’s business of facilitating trades for arm’s length customers are not inappropriately caught by the base erosion rules;

(

c) modernizes the life insurance policy exemption test;

(

d) amends the foreign affiliate rules to ensure they apply appropriately to structures that include partnerships and makes generally relieving changes to certain of the base erosion rules to ensure they do not apply in unintended circumstances;

(

e) amends the rules for determining the residence of international shipping corporations;

(

f) provides for the appropriate taxation of taxpayers that invest in Australian trusts;

(

g) amends the foreign affiliate dumping rules to ensure the rules apply in appropriate circumstances and, if applicable, provide appropriate results;

(

h) excludes from the definition non-qualifying country in the foreign affiliate rules those countries or other jurisdictions for which the Convention on Mutual Administrative Assistance in Tax Matters is in force and effect;

(

i) avoids unintended tax consequences with respect to the British Overseas Territory of the British Virgin Islands;

(

j) simplifies the rules for the Canadian Film or Video Production Tax Credit regime;

(

k) amends the trust loss restriction event rules to provide relief for investment trusts that meet specific conditions; and

(

l) increases the maximum amount that may be claimed under the Children Fitness Tax Credit and makes the credit refundable starting in 2015.

Part 2 implements certain goods and services tax/harmonized sales tax (GST/HST) measures by

(

a) ensuring that pooled registered pension plans are subject to similar GST/HST treatment as registered pension plans;

(

b) implementing real property technical amendments that provide for the consistent treatment of different types of housing and ensure that the special valuation rule for subsidized housing works properly with the GST/HST place of supply rules and in the context of a GST/HST rate change;

(

c) clarifying the application of GST/HST public service body rebates in relation to non-profit organizations that operate certain health care facilities; and

(

d) relieving the GST/HST on services of refining precious metals supplied to a non-resident person that is not registered for GST/HST purposes.

Part 3 amends the Excise Act, 2001 to provide a refund of the inventory tax, introduced in the February 11, 2014 budget, on cigarettes that are destroyed or re-worked, in line with the refund of the excise duty that exists for tobacco products that are destroyed or re-worked.

Part 4 enacts and amends several Acts in order to implement various measures.

Division 1 of

Part 4 amends the Industrial Design Act to make that Act consistent with the Geneva

(1999) Act of the Hague Agreement Concerning the International Registration of Industrial Designs and to give the Governor in Council the authority to make regulations for carrying it into effect. The amendments include provisions relating to the contents of an application for the registration of a design, requests for priority, and the term of an exclusive right for a design.

It also amends the Patent Act to, among other things, make that Act consistent with the provisions of the Patent Law Treaty. The amendments include reducing the requirements for obtaining a filing date in relation to an application for a patent, requiring that an applicant be notified of a missed due date before an application is deemed to be abandoned, and providing that a patent may not be invalidated for non-compliance with certain requirements relating to the application on the basis of which the patent was granted.

Division 2 of

Part 4 amends the Aeronautics Act to authorize the Minister of Transport to make an order, and the Governor in Council to make regulations, that prohibit the development or expansion of or any change to the operation of an aerodrome. It also amends the Act to authorize the Governor in Council to make regulations in respect of consultations by the proponents and operators of aerodromes.

Division 3 of

Part 4 enacts the Canadian High Arctic Research Station Act , which establishes a new federal research organization that is to be responsible for advancing knowledge of the Canadian Arctic through scientific investigation and technology, promoting the development and dissemination of knowledge of the other circumpolar regions, strengthening Canada’s leadership on Arctic issues and ensuring a research presence in the Canadian Arctic. It also repeals the Canadian Polar Commission Act and makes consequential amendments to other Acts.

Division 4 of

Part 4 amends

section 207 of the Criminal Code to permit charitable or religious organizations to carry out, with the use of a computer, certain operations relating to a provincially-licensed lottery scheme.

Division 5 of

Part 4 amends the Federal-Provincial Fiscal Arrangements Act to adjust the national standard for eligibility for social assistance to provide that no minimum period of residence is to be required for Canadian citizens, for permanent residents, for victims of human trafficking who hold a temporary resident permit or for protected persons.

Division 6 of

Part 4 amends the Radiocommunication Act to:

(

a) introduce an administrative monetary penalty regime;

(

b) explicitly prohibit jammers, subject to exemptions provided by the Minister of Industry;

(

c) provide for the enforcement of rules, standards and procedures established for competitive bidding systems for radio authorizations;

(

d) modernize wording relating to the powers of inspectors and the requirements to obtain warrants;

(

e) authorize inspectors to request information in writing and to seize non-compliant devices; and

(

f) authorize the Minister of Industry to share information with domestic and foreign bodies for the purpose of regulating radiocommunication.

Division 7 of

Part 4 amends the Revolving Funds Act to correct an error in the heading before

section 4 by replacing the reference to the Minister of Foreign Affairs with a reference to the Minister of Citizenship and Immigration. The amendment is deemed to have come into force on July 2, 2013.

Division 8 of

Part 4 amends the Royal Canadian Mint Act to eliminate the anticipation of profit by the Royal Canadian Mint with respect to the provision of goods and services to the Government of Canada.

Division 9 of

Part 4 amends the Investment Canada Act to require foreign investors to provide notification whenever they acquire a Canadian business through the realization of security on a loan or other financial assistance, unless another Act applies. It also allows public disclosure of certain information related to the national security review process and makes related amendments to another Act.

Division 10 of

Part 4 amends the Broadcasting Act to prohibit a person who carries on a broadcasting undertaking from charging a subscriber for providing the subscriber with a paper bill.

Division 11 of

Part 4 amends the Telecommunications Act to provide the Canadian Radio-television and Telecommunications Commission (CRTC) with the authority to impose certain conditions concerning the offering and provision of services on providers of telecommunications services that are not telecommunications carriers, to prohibit providers of telecommunications services from charging subscribers for the provision of paper bills, to allow for sharing of information between the CRTC and the Competition Bureau, to provide the CRTC with the authority to impose administrative monetary penalties for violations of the Telecommunications Act , CRTC decisions and regulations, to provide the Minister of Industry with the authority to establish a registration system and update other processes relating to telecommunications apparatus in order to assess conformity with technical requirements, and to update inspection powers for ensuring compliance with that Act.

Division 12 of

Part 4 amends the Business Development Bank of Canada Act to clarify the financial and management services that the Business Development Bank of Canada is authorized to provide, including financial services in respect of enterprises operating outside Canada. It also makes some changes to the governance provisions of that Act.

Division 13 of

Part 4 amends the Northwest Territories Act — enacted by

section 2 of

chapter 2 of the Statutes of Canada, 2014 — to provide that, if the election period for the first general election under that Act would overlap with the election period for a federal general election, then the maximum duration of the first Legislative Assembly of the Northwest Territories under that Act may be extended until five years from the date fixed for the return of the writs at the last general election under the former Northwest Territories Act (chapter N-27 of the Revised Statutes of Canada).

Division 14 of

Part 4 amends the Employment Insurance Act to allow for the refund of a portion of employer premiums paid by small businesses in 2015 and 2016. An employer is eligible for that refund if its premium is $15,000 or less for the year in question.

It also amends that Act to exclude from reconsideration under

section 112 of that Act decisions of the Canada Employment Insurance Commission made under the Employment Insurance Regulations respecting the writing off of penalties owing, amounts payable or interest accrued on any penalties owing or amounts payable.

Division 15 of

Part 4 amends the Canada-Chile Free Trade Agreement Implementation Act in order to implement amendments to the dispute resolution mechanism of the Canada-Chile Free Trade Agreement.

Division 16 of

Part 4 amends the Canada Marine Act to provide for the power to make regulations with respect to undertakings that are situated in a port. It also authorizes those regulations to incorporate by reference documents, including the laws of a province. Finally, it authorizes port authorities to acquire federal real property or federal immovables and to lease or license any real property or immovable other than federal real property or federal immovables.

Division 17 of

Part 4 amends the DNA Identification Act to, among other things,

(

a) create new indices in the national DNA data bank that will contain DNA profiles from missing persons, from their relatives and from human remains to assist law enforcement agencies, as well as coroners, medical examiners and persons or organizations with similar duties or functions, to find missing persons and identify human remains;

(

b) create a new index that will contain DNA profiles from victims of designated offences to assist law enforcement agencies in identifying persons alleged to have committed designated offences;

(

c) create a new index that will contain DNA profiles derived from bodily substances that are voluntarily submitted by individuals to assist in either the investigations of missing persons or designated offences;

(

d) establish criteria for adding and retaining DNA profiles in, and removing them from, the new indices, and transferring profiles between indices;

(

e) specify which DNA profiles in the existing and new indices will be compared with each other;

(

f) specify the purposes for which the Commissioner of the RCMP may communicate the results of comparisons of DNA profiles and the purposes for which that information may be subsequently communicated; and

(

g) specify the uses to which the results of comparisons of DNA profiles may be put.

It also makes consequential amendments to the Access to Information Act and the Public Servants Disclosure Protection Act .

Division 18 of

Part 4 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to provide that certain foreign entities that are engaged in the money-services business are included in the definition foreign entity .

Division 19 of

Part 4 amends the Department of Employment and Social Development Act to eliminate the limit on the number of full-time and part-time members of the Social Security Tribunal.

Division 20 of

Part 4 amends the Public Health Agency of Canada Act to create a new position of President as deputy head of the Public Health Agency of Canada, thereby separating the responsibilities of the Chief Public Health Officer from those of the deputy head of the Agency.

Division 21 of

Part 4 amends the Economic Action Plan 2013 Act, No. 2 in order to provide that certain provisions of Division 8 of

Part 3 of that Act apply to any corporation resulting from an amalgamation referred to in that Division, and to provide that certain provisions of the Blue Water Bridge Authority Act continue to apply to the Blue Water Bridge Authority after its continuance.

Division 22 of

Part 4 amends several Acts to discontinue supervision of provincial central cooperative credit societies by the Office of the Superintendent of Financial Institutions, to eliminate tools for federal intervention in relation to those centrals and to provincial local cooperative credit societies, and to facilitate the entry of provincial cooperative credit societies into the federal credit union system by simplifying the process for continuation and amalgamation that applies to them.

Division 23 of

Part 4 amends the Financial Administration Act to authorize Her Majesty in right of Canada to neither pay nor collect low-value amounts, except amounts owed by Crown corporations to persons other than Her Majesty in right of Canada, amounts payable to Crown corporations by such persons, amounts payable under the Air Travellers Security Charge Act , the Excise Act, 2001 , the Excise Tax Act , the Income Tax Act or the Softwood Lumber Products Export Charge Act, 2006 , and amounts related to the public debt or to interest on the public debt.

It also provides Treasury Board with the authority to make regulations to set a low-value threshold, to specify circumstances for the accumulation of amounts and to exclude amounts, as well as regulations generally respecting the operation of the authority to neither pay nor collect low-value amounts.

Division 24 of

Part 4 amends the Immigration and Refugee Protection Act to, among other things,

(

a) replace references to an opinion provided by the Department of Employment and Social Development, with respect to an application for a work permit, with references to an “assessment”;

(

b) authorize the Minister of Citizenship and Immigration or the Minister of Employment and Social Development to publish on a list the name and address of an employer who, among other things, has been convicted of certain offences; and

(

c) authorize the Governor in Council to make regulations

(

i) regarding the publication and removal of the names and addresses of employers,

(ii)

regarding the power to require documents from any individual or entity for inspection in order to verify compliance with regulatory conditions,

(iii)

requiring an employer to provide prescribed information in relation to a foreign national’s authorization to work in Canada for the employer,

(iv)

governing fees to be paid for rights and privileges in relation to an assessment provided by the Department of Employment and Social Development with respect to an application for a work permit,

(

v) governing fees to be paid in respect of the compliance regime that applies to employers in relation to their employment of certain foreign nationals,

(vi)

regarding the collection, retention, use, disclosure and disposal of Social Insurance Numbers, and

(vii)

regarding the disclosure of information for the purposes of cooperation between the Government of Canada and the government of a province.

Division 25 of

Part 4 amends the Judges Act and the Federal Courts Act to implement the Government’s Response to the Report of the Special Advisor on Federal Court Prothonotaries’ Compensation with respect to the salary and benefits of the prothonotaries of the Federal Court.

Division 26 of

Part 4 amends the Canadian Payments Act to make changes to the governance structure of the Canadian Payments Association and to add new obligations in respect of accountability, including by

(

a) changing the composition of the Board of the Directors of the Association and the procedures for selecting the directors of the Board;

(

b) establishing a Member Advisory Council;

(

c) expanding the power of the Minister of Finance to issue directives to the Association; and

(

d) adding new obligations in respect of the preparation of annual reports and corporate plans.

Division 27 of

Part 4 amends the Payment Clearing and Settlement Act to expand and enhance the oversight powers of the Bank of Canada with respect to systems for the clearing and settlement of payment obligations and other financial transactions, so that the Bank is better able to identify risks related to financial market infrastructure and to respond in a timely and proactive manner. It also makes minor consequential amendments to other Acts.

Division 28 of

Part 4 enacts the Extractive Sector Transparency Measures Act in order to impose the following obligations on entities that are engaged in the commercial development of oil, gas or minerals for the purpose of implementing Canada’s international commitments in the fight against corruption:

(

a) the obligation to report to the responsible Minister certain payments made to payees; and

(

b) the obligation to make reported information accessible to the public.

For the purpose of verifying compliance, the Act provides for an inspection regime and gives a power to the responsible Minister to require an entity to provide certain information. Finally, the Act provides for certain offences relating to the obligations under the Act.

Division 29 of

Part 4 amends the Jobs and Economic Growth Act to provide that Canadian Nuclear Laboratories Ltd. (CNL) is an agent of Her Majesty in right of Canada, effective as of the date of CNL’s incorporation, and to provide that CNL will cease to be an agent on the day on which Atomic Energy of Canada Limited disposes of CNL’s shares. The Division also amends that Act to provide that the Public Service Superannuation Act will apply for a transitional period of three years to persons who are employees of CNL on that day.

Division 30 of

Part 4 repeals a provision of the Economic Action Plan 2013 Act, No. 2 that amended a provision of the Public Service Labour Relations Act . It also amends provisions of the Economic Action Plan 2013 Act, No. 2 that amended the Public Service Employment Act in respect of the staffing complaint process.

It also makes a technical correction to a coordinating amendment in the Economic Action Plan 2013 Act, No. 2 .

Division 31 of

Part 4 transfers the pensionable service that is to the credit of certain Royal Canadian Mounted Police pension contributors under the Royal Canadian Mounted Police Superannuation Act to the Public Service Superannuation Act and deems those contributors to be Group 1 contributors under the Public Service Superannuation Act . It also amends the Royal Canadian Mounted Police Superannuation Act to repeal provisions relating to members of the Royal Canadian Mounted Police not holding a rank.

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

SHORT TITLE

Short title

This Act may be cited as the Economic Action Plan 2014 Act, No. 2 .

PART 1 AMENDMENTS TO THE INCOME TAX ACT AND A RELATED TEXT

R.S., c. 1 (5th Supp.)

Income Tax Act

(1) Subparagraph ( a )(

i) of the description of B in subsection 12(10.2) of the Income Tax Act is replaced by the following:

(

i) deemed by subsection (10.4) or 104(5.1) or (14.1) (as it read for the taxpayer’s 2015 taxation year) to have been paid out of the taxpayer’s NISA Fund No. 2 before the particular time, or

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

(1) Paragraph 14(1.01)(

c) of the Act is replaced by the following:

(

c) if the eligible capital property is a qualified farm or fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (

b) to have been disposed of by the taxpayer is deemed to be a qualified farm or fishing property of the taxpayer at that time.

(2) Paragraph 14(1.02)(

c) of the Act is replaced by the following:

(

b) to have been disposed of by the taxpayer is deemed to be a qualified farm or fishing property of the taxpayer at that time.

(3) The portion of subsection 14(1.1) of the Act before paragraph (

a) is replaced by the following:

Deemed taxable capital gain

(1.1) For the purposes of

section 110.6 and paragraph 3(

b) as it applies for the purposes of that section, an amount included under paragraph (1)(

b) in computing a taxpayer’s income for a particular taxation year from a business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified farm or fishing property to the extent of the lesser of

(4) The descriptions of A and B in paragraph 14(1.1)(

b) of the Act are replaced by the following:

is the amount by which the total of

(i)

3/4 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in a preceding taxation year that began after 1987 and ended before February 28, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer,

(ii)

2/3 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, and

(iii)

1/2 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after October 17, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property, a qualified fishing property or a qualified farm or fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer

exceeds the total of

(iv)

3/4 of the total of all amounts each of which is

(

A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a property that was, at the time of disposition, a qualified farm property disposed of by the taxpayer in a preceding taxation year that began after 1987 and ended before February 28, 2000, or

(

B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A),

(v)

2/3 of the total of all amounts each of which is

(

A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a property that was, at the time of disposition, a qualified farm property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000, or

(

B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and

(vi)

1/2 of the total of all amounts each of which is

(

A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a property that was, at the time of disposition, a qualified farm property, a qualified fishing property or a qualified farm or fishing property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after October 17, 2000, or

(

is the total of all amounts each of which is

(

i) that portion of an amount deemed by subparagraph (1)( a )(v) (as it applied in respect of the business to fiscal periods that began after 1987 and ended before February 23, 1994) to be a taxable capital gain of the taxpayer that can reasonably be attributed to a disposition of a property that was, at the time of disposition, a qualified farm property of the taxpayer, or

(ii)

an amount deemed by this

section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of a property that was, at the time of disposition, a qualified farm property, a qualified fishing property or a qualified farm or fishing property of the taxpayer.

(5) Subsection 14(1.2) of the Act is repealed.

(6) Subsections (1) to (5) apply to dispositions and transfers that occur in the 2014 and subsequent taxation years.

(1) The portion of subsection 15(2.14) of the Act before paragraph (

a) is replaced by the following:

Partnerships

(2.14) For purposes of this subsection, subsection (2.11),

section 17.1 and subsection 18(5),

(2) Subsection (1) applies to taxation years that end after March 28, 2012, except that, if an election is made by a taxpayer under subsection 49(3) of the Jobs and Growth Act, 2012 , subsection (1) does not apply to taxation years of the taxpayer that end before August 14, 2012.

(1) Subsection 17(1) of the Act is replaced by the following:

Amount owing by non-resident

(1) If this subsection applies to a corporation resident in Canada in respect of an amount owing to the corporation (in this subsection referred to as the “debt”), the corporation shall include in computing its income for a taxation year the amount determined by the formula

A – B where A

is the amount of interest that would be included in computing the corporation’s income for the year in respect of the debt if interest on the debt were computed at the prescribed rate for the period in the year during which the debt was outstanding; and

is the total of all amounts each of which is

(

a) an amount included in computing the corporation’s income for the year as, on account of, in lieu of or in satisfaction of, interest in respect of the debt,

(

b) an amount received or receivable by the corporation from a trust that is included in computing the corporation’s income for the year or a subsequent taxation year and that can reasonably be attributed to interest on the debt for the period in the year during which the debt was outstanding, or

(

c) an amount included in computing the corporation’s income for the year or a subsequent taxation year under subsection 91(1) that can reasonably be attributed to interest on an amount owing (in this paragraph referred to as the “original debt”) — or if the amount of the original debt exceeds the amount of the debt, a portion of the original debt that is equal to the amount of the debt — for the period in the year during which the debt was outstanding if

(

i) without the existence of the original debt, subsection (2) would not have deemed the debt to be owed by the non-resident person referred to in paragraph (1.1)( a ),

(ii)

the original debt was owed by a non-resident person or a partnership each member of which is a non-resident person, and

(iii)

where subsection (11.2) applies to the original debt,

(

A) an amount determined under paragraph (11.2)(

a) or (

b) in respect of the original debt is an amount referred to in paragraph (2)( a ), and because of the amount referred to in paragraph (2)( a ), the debt is deemed to be owed by the non-resident person referred to in paragraph (1.1)( a ), and

(

B) the original debt was owing by an intermediate lender to an initial lender or by an intended borrower to an intermediate lender (within the meanings of those terms assigned by subsection (11.2)).

Amount owing by non-resident

(1.1) Subsection (1) applies to a corporation resident in Canada in respect of an amount owing to the corporation if, at any time in a taxation year of the corporation,

(

a) a non-resident person owes the amount to the corporation;

(

b) the amount has been or remains outstanding for more than a year; and

(

c) the amount that would be determined for B in subsection (1), if that subsection applied, for the year in respect of the amount owing is less than the amount of interest that would be included in computing the corporation’s income for the year in respect of the amount owing if that interest were computed at a reasonable rate for the period in the year during which the amount was outstanding.

(2) The portion of paragraph 17(2)(

b) of the Act before subparagraph (

i) is replaced by the following:

(

b) it is reasonable to conclude that the amount or a portion of the amount became owing, or was permitted to remain owing, to the particular person or partnership because

(3) The portion of subsection 17(2) of the Act after paragraph (

b) is replaced by the following:

the non-resident person is deemed at that time to owe to the corporation an amount equal to the amount, or the portion of the amount, as the case may be, owing to the particular person or partnership.

(4) Subsection (1) applies to taxation years that begin after February 23, 1998.

(5) Subsections (2) and (3) apply to taxation years that begin after July 12, 2013.

(1) The portion of subsection 18(5) of the Act before the first definition is replaced by the following:

Definitions

(5) Notwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) and (5.1) to (6.1),

(2) Paragraph (

b) of the definition outstanding debts to specified non-residents in subsection 18(5) of the Act is replaced by the following:

(

b) an amount outstanding at the particular time as or on account of a debt or other obligation

(

i) to pay an amount to

(

A) a non-resident insurance corporation to the extent that the obligation was, for the non-resident insurance corporation’s taxation year that included the particular time, designated insurance property in respect of an insurance business carried on in Canada through a permanent establishment as defined by regulation, or

(

B) an authorized foreign bank, if the bank uses or holds the obligation at the particular time in its Canadian banking business, or

(ii)

that is a debt obligation described in subparagraph (ii) of the description of A in paragraph 17.1(1)(

b) to the extent that the proceeds of the debt obligation can reasonably be considered to directly or indirectly fund at the particular time, in whole or in part, a pertinent loan or indebtedness (as defined in subsection 212.3(11)) owing to the corporation or another corporation resident in Canada that does not, at the particular time, deal at arm’s length with the corporation;

(3) Subsection 18(5) of the Act is amended by adding the following in alphabetical order:

security interest

garantie

security interest , in respect of a property, means an interest in, or for civil law a right in, the property that secures payment of an obligation;

specified right

droit déterminé

specified right , at any time in respect of a property, means a right to, at that time, mortgage, hypothecate, assign, pledge or in any way encumber the property to secure payment of an obligation — other than the particular debt or other obligation described in paragraph (6)(

a) or a debt or other obligation described in subparagraph (6)( d )(ii) — or to use, invest, sell or otherwise dispose of, or in any way alienate, the property unless it is established by the taxpayer that all of the proceeds (net of costs, if any) received, or that would be received, from exercising the right must first be applied to reduce an amount described in subparagraph (6)( d )(

i) or (ii);

(4) Subsection 18(6) of the Act is replaced by the following:

Back-to-back loan arrangement

(6) Subsection (6.1) applies at any time in respect of a taxpayer if at that time

(

a) the taxpayer has a particular amount outstanding as or on account of a particular debt or other obligation to pay an amount to a person (in this subsection and subsection (6.1) referred to as the “intermediary”);

(

b) the intermediary is neither

(

i) a person resident in Canada with whom the taxpayer does not deal at arm’s length, nor

(ii)

a person that is, in respect of the taxpayer, described in subparagraph ( a )(

i) of the definition outstanding debts to specified non-residents in subsection (5);

(

c) the intermediary or a person that does not deal at arm’s length with the intermediary

(

i) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a particular non-resident person that is, in respect of the taxpayer, described in subparagraph ( a )(

i) of the definition outstanding debts to specified non-residents in subsection (5) that meets any of the following conditions (in this subsection and subsection (6.1) referred to as the “intermediary debt”):

(

A) recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to the particular debt or other obligation, or

(

B) it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because

(

I) all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or

(II)

the intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or

(ii)

has a specified right in respect of a particular property that was granted directly or indirectly by a person that is, in respect of the taxpayer, a particular non-resident person described in subparagraph ( a )(

i) of the definition outstanding debts to specified non-residents in subsection (5) and

(

A) the existence of the specified right is required under the terms and conditions of the particular debt or other obligation, or

(

B) it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because

(

I) the specified right was granted, or

(II)

the intermediary anticipated that the specified right would be granted; and

(

d) the total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph ( c )(ii) — is equal to at least 25% of the total of

(

i) the particular amount, and

(ii)

the total of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the intermediary under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into if

(

A) the intermediary is granted a security interest in respect of a property that is the intermediary debt or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, and

(

B) each security interest that secures the payment of a debt or other obligation referred to in clause (

A) secures the payment of every debt or other obligation referred to in that clause.

Back-to-back loan arrangement

(6.1) If this subsection applies at any time in respect of a taxpayer,

(

a) then for the purpose of applying subsections (4) and (5),

(

i) the portion of the particular amount, at that time, referred to in paragraph (6)(

a) that is equal to the lesser of the following amounts is deemed to be an amount outstanding as or on account of a debt or other obligation to pay an amount to the particular non-resident person referred to in subparagraph (6)( c )(

i) or (ii), as the case may be, and not to the intermediary:

(

A) the amount outstanding as or on account of the intermediary debt or the fair market value of the particular property referred to in subparagraph (6)( c )(ii), as the case may be, and

(

B) the proportion of the particular amount that the amount outstanding or the fair market value, as the case may be, is of the total of all amounts each of which is

(

I) an amount outstanding as or on account of an intermediary debt in respect of the particular debt or other obligation, owed to the particular non-resident or any other non-resident person that is, in respect of the taxpayer, described in the definition outstanding debts to specified non-residents in subsection (5), or

(II)

the fair market value of a particular property referred to in subparagraph (6)( c )(ii) in respect of the particular debt or other obligation, and

(ii)

the portion of the interest paid or payable by the taxpayer, in respect of a period throughout which subparagraph ( a )(

i) applies, on the particular debt or other obligation referred to in paragraph (6)(

a) that is equal to the amount determined by the following formula is deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, as interest for the period on the amount deemed by subparagraph ( a )(

i) to be outstanding to the particular non-resident:

A × B/C where A

is the interest paid or payable,

is the average of all amounts each of which is an amount that is deemed by subparagraph ( a )(

i) to be outstanding to the particular non-resident at a time during the period, and

is the average of all amounts each of which is the particular amount outstanding at a time during the period; and

(

b) for the purposes of

Part XIII and subject to subsections 214(16) and (17), interest deemed under subparagraph ( a )(ii) to be paid or payable to the particular non-resident in respect of a period is, to the extent that the interest is not deductible in computing the income of the taxpayer for the year because of subsection 18(4), deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, in respect of the period.

(5) The portion of subsection 18(7) of the Act before paragraph (

a) is replaced by the following:

Partnership debts and property

(7) For the purposes of this subsection, paragraph (4)( a ), subsections (5) to (6.1) and paragraph 12(1)( l.1 ), each member of a partnership at any time is deemed at that time

(6) Subsections (1) and (3) to (5) apply to taxation years that begin after 2014.

(7) Subsection (2) applies to taxation years that end after March 28, 2012, except that, if an election is made by a taxpayer under subsection 49(3) of the Jobs and Growth Act, 2012 , subsection (2) does not apply to taxation years of the taxpayer that end before August 14, 2012.

(1) Paragraph 28(1)(

g) of the Act is replaced by the following:

(

g) the total of all amounts each of which is an amount deducted for the year under paragraph 20(1)( a ), (

b) or ( uu ), subsection 20(16) or 24(1),

section 30 or subsection 80.3(2), (4) or (4.1) in respect of the business,

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

(1) Paragraph 34.1(1)(

a) of the Act is replaced by the following:

(

a) an individual (other than a graduated rate estate) carries on a business in a taxation year,

(2) Paragraph 34.1(2)(

a) of the Act is replaced by the following:

(

a) an individual (other than a graduated rate estate) begins carrying on a business in a taxation year and not earlier than the beginning of the first fiscal period of the business that begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and

(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

(1) Subparagraph 38( a.1 )(ii) of the Act is replaced by the following:

(ii)

the disposition is deemed by

section 70 to have occurred and the property is

(

A) a security described in subparagraph (i), and

(

B) the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s graduated rate estate to a qualified donee, or

(2) Subparagraph 38( a.2 )(ii) of the Act is replaced by the following:

(ii)

the disposition is deemed by

section 70 to have occurred and the property is

(

A) described in subparagraph (i), and

(

B) the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s graduated rate estate to a qualified donee (other than a private foundation);

(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

(1) Subparagraph 39(1)( a )(i.1) of the Act is replaced by the following:

(i.1)

an object that the Canadian Cultural Property Export Review Board has determined meets the criteria set out in paragraphs 29(3)(

b) and (

c) of the Cultural Property Export and Import Act if

(

A) the disposition is to an institution or a public authority in Canada that was, at the time of the disposition, designated under subsection 32(2) of that Act either generally or for a specified purpose related to that object, or

(

B) the disposition is deemed by

section 70 to have occurred and the object is the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s graduated rate estate to an institution that would be described in clause (

A) if the disposition were made at the time the estate makes the gift,

(2) Subparagraph 39(1)( c )(vii) of the Act is replaced by the following:

(vii)

in the case of a share to which subparagraph (vi) applies and where the taxpayer is a trust referred to in paragraph 104(4)(

a) or ( a.4 ), the total of all amounts each of which is an amount received after 1971 or receivable at the time of the disposition by the settlor (within the meaning assigned by subsection 108(1)) or by the settlor’s spouse as a taxable dividend on the share or on any other share in respect of which it is a substituted share, and

(3) Subparagraph 39(1)( c )(vii) of the Act, as enacted by subsection (2), is replaced by the following:

(vii)

in the case of a share to which subparagraph (vi) applies and where the taxpayer is a trust for which a day is to be, or has been, determined under paragraph 104(4)( a ), or ( a.4 ) by reference to a death or later death, as the case may be, the total of all amounts each of which is an amount received after 1971 or receivable at the time of the disposition, as a taxable dividend on the share or on any other share in respect of which it is a substituted share, by an individual whose death is that death or later death, as the case may be, or a spouse or common-law partner of the individual, and

(4) Subsections (1) and (3) apply to the 2016 and subsequent taxation years.

(5) Subsection (2) applies to the 2014 and 2015 taxation years.

(1) Subparagraph 40(1.1)( c )(ii) of the Act is replaced by the following:

(ii)

a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)), or

(2) Paragraph 40(1.1)(

c) of the Act is amended by striking out “or” at the end of subparagraph (iii) and by repealing subparagraph (iv).

(3) The portion of subsection 40(3.12) of the Act before paragraph (

a) is replaced by the following:

Deemed loss for certain partners

(3.12) If a corporation, an individual (other than a trust) or a graduated rate estate (each of which is referred to in this subsection as the “taxpayer”) is a member of a partnership at the end of a fiscal period of the partnership, the taxpayer is deemed to have a loss from the disposition at that time of the member’s interest in the partnership equal to the amount that the taxpayer elects in the taxpayer’s return of income under this Part for the taxation year that includes that time, not exceeding the lesser of

(4) Subsections (1) and (2) apply to dispositions and transfers that occur in the 2014 and subsequent taxation years.

(5) Subsection (3) applies to the 2016 and subsequent taxation years.

(1) Subparagraph 69(1)( b )(ii) of the Act is replaced by the following:

(ii)

to any person by way of gift, or

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

(1) Paragraph 70(9)(

a) of the English version of the Act is replaced by the following:

(

a) the property was, before the death of the taxpayer, used principally in a farming or fishing business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child or parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot);

(2) Paragraph 70(9.1)(

c) of the English version of the Act is replaced by the following:

(

c) the property is, immediately before the beneficiary’s death, land or a depreciable property of a prescribed class of the trust that was used in a farming or fishing business carried on in Canada;

(3) Paragraph 70(9.2)(

a) of the Act is replaced by the following:

(

a) the property was, immediately before the death of the taxpayer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer;

(4) The portion of subparagraph 70(9.21)( a )(ii) of the Act before clause (

A) is replaced by the following:

(ii)

where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family farm or fishing corporation of the taxpayer,

(5) The portion of subparagraph 70(9.21)( b )(ii) of the Act before clause (

A) is replaced by the following:

(ii)

subject to subparagraph (iii), where the property is, immediately before the taxpayer’s death, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer,

(6) Paragraph 70(9.3)(

a) of the Act is replaced by the following:

(

a) the property (or property for which the property was substituted) was transferred to the trust by the settlor and was, immediately before that transfer, a share of the capital stock of a family farm or fishing corporation of the settlor or an interest in a family farm or fishing partnership of the settlor;

(7) Subparagraphs 70(9.3)( c )(

i) and (ii) of the Act are replaced by the following:

(

i) a share of the capital stock of a Canadian corporation that would, immediately before that beneficiary’s death, be a share of the capital stock of a family farm or fishing corporation of the settlor, if the settlor owned the share at that time and paragraph (

a) of the definition share of the capital stock of a family farm or fishing corporation in subsection (10) were read without the words “in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)”, or

(8) Subparagraph 70(9.3)( c )(iii) of the Act is replaced by the following:

(iii)

a partnership interest in a partnership that carried on in Canada a farming or fishing business in which it used all or substantially all of the property;

(9) The portion of subparagraph 70(9.31)( a )(ii) of the Act before clause (

A) is replaced by the following:

(ii)

where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)( c )(i),

(10) The portion of subparagraph 70(9.31)( b )(ii) of the Act before clause (

A) is replaced by the following:

(ii)

subject to subparagraph (iii), where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)( c )(

i) or a partnership interest described in subparagraph (9.3)( c )(iii),

(11) Subsection 70(9.8) of the Act is replaced by the following:

Leased farm or fishing property

(9.8) For the purposes of subsections (9) and 14(1), paragraph 20(1)( b ), subsection 73(3) and paragraph (

d) of the definition qualified farm or fishing property in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a farming or fishing business carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a farming or fishing business in Canada, by

(

a) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm or fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual; or

(

b) a partnership, a partnership interest in which is an interest in a family farm or fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual.

(12) The

definitions interest in a family farm partnership , interest in a family fishing partnership , share of the capital stock of a family farm corporation and share of the capital stock of a family fishing corporation in subsection 70(10) of the Act are repealed.

(13) The definition child in subsection 70(10) of the Act is amended by striking out “and” at the end of paragraph (

b) and by adding the following after that paragraph:

( b.1 )

a person who was a child of the taxpayer immediately before the death of the person’s spouse or common-law partner, and

(14) Subsection 70(10) of the Act is amended by adding the following in alphabetical order:

interest in a family farm or fishing partnership

participation dans une société de personnes agricole ou de pêche familiale

interest in a family farm or fishing partnership , of an individual at any time, means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(

a) property that has been used principally in the course of carrying on a farming or fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), by

(

i) the partnership,

(ii)

a corporation, a share of the capital stock of which was a share of the capital stock of a family farm or fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(iii)

a partnership, a partnership interest in which was an interest in a family farm or fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or

(iv)

the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(

b) shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to property described in paragraph ( d ),

(

c) partnership interests or indebtedness of one or more partnerships of which all or substantially all of the fair market value of the property was attributable to property described in paragraph ( d ), or

(

d) properties described in any of paragraphs (

a) to ( c );

share of the capital stock of a family farm or fishing corporation

action du capital-actions d’une société agricole ou de pêche familiale

share of the capital stock of a family farm or fishing corporation , of an individual at any time, means a share of the capital stock of a corporation owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to

(

i) the corporation,

(ii)

(iii)

a corporation controlled by a corporation described in subparagraph (

i) or (ii),

(iv)

(

v) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(

d) properties described in any of paragraphs (

a) to ( c ).

(15) Subsection 70(12) of the Act is replaced by the following:

Value of NISA

(12) For the purpose of the definition share of the capital stock of a family farm or fishing corporation in subsection (10), the fair market value of a net income stabilization account is deemed to be nil.

(16) Subsections (1) to (10) and (12) to (15) are deemed to have come into force on January 1, 2014.

(17) Subsection (11) applies to dispositions and transfers that occur in the 2014 and subsequent taxation years.

(1) Paragraph 73(3)(

a) of the English version of the Act is replaced by the following:

(

a) the property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a farming or fishing business carried on in Canada by the taxpayer;

(2) Paragraph 73(3)(

c) of the English version of the Act is replaced by the following:

(

c) the property has been used principally in a farming or fishing business in which the taxpayer, the taxpayer’s spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot).

(3) Paragraph 73(4)(

b) of the Act is replaced by the following:

(

b) the property was, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer (as defined in subsection 70(10)).

(4) The portion of paragraph 73(4.1)(

a) of the Act before subparagraph (

i) is replaced by the following:

(

a) subject to paragraph ( c ), where the property was, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,

(5) Paragraph 73(4.1)(

b) of the Act is replaced by the following:

(

b) subject to paragraph ( c ), where the property is, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer, the child is deemed to have acquired the property for an amount equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph ( a );

(6) The portion of paragraph 73(4.1)(

c) of the Act before subparagraph (

i) is replaced by the following:

(

c) where the property is, immediately before the transfer, an interest in a family farm or fishing partnership of the taxpayer (other than a partnership interest to which subsection 100(3) applies), the taxpayer receives no consideration in respect of the transfer of the property and the taxpayer elects, in the taxpayer’s return of income under this Part for the taxation year which includes the time of the transfer, to have this paragraph apply in respect of the transfer of the property,

(7) Subsections (1) to (6) apply to transfers that occur in the 2014 and subsequent taxation years.

(1) Subsection 80.03(8) of the Act is replaced by the following:

Lifetime capital gains exemption

(8) If, as a consequence of the disposition at any time by an individual of a property that is a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual (as defined in subsection 110.6(1)), the individual is deemed by subsection (2) to have a capital gain at that time from the disposition of another property, for the purposes of sections 3, 74.3 and 111, as they apply for the purposes of

section 110.6, the other property is deemed to be a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual, as the case may be.

(2) Subsection (1) applies to dispositions that occur in the 2014 and subsequent taxation years.

(1) Clause 80.04(6)( a )(ii)(

B) of the Act is replaced by the following:

(

B) if the debtor is an individual (other than a trust) or a graduated rate estate, the day that is one year after the taxpayer’s filing-due date for the year;

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

(1) The definition breeding animals in subsection 80.3(1) of the Act is replaced by the following:

breeding animals

animaux reproducteurs

breeding animals means deer, elk and other similar grazing ungulates, bovine cattle, bison, goats, sheep and horses that are over 12 months of age and are kept for breeding;

(2) Subsection 80.3(1) of the Act is amended by adding the following in alphabetical order:

breeding bees

abeilles reproductrices

breeding bees means bees that are not used principally to pollinate plants in greenhouses and larvae of those bees;

breeding bee stock

stock d’abeilles reproductrices

breeding bee stock , of a taxpayer at any time, means a reasonable estimate of the quantity of a taxpayer’s breeding bees held at that time in the course of carrying on a farming business using a unit of measurement that is accepted as an industry standard;

(3) Section 80.3 of the Act is amended by adding the following after subsection (4):

Income deferral

(4.1) If in a taxation year a taxpayer carries on a farming business in a region that is at any time in the year a prescribed drought region or a prescribed region of flood or excessive moisture and the taxpayer’s breeding bee stock at the end of the year in respect of the business does not exceed 85% of the taxpayer’s breeding bee stock at the beginning of the year in respect of the business, there may be deducted in computing the taxpayer’s income from the business for the year the amount that the taxpayer claims, not exceeding the amount, if any, determined by the formula

(A – B) × C where A

is the amount by which

(

a) the total of all amounts included in computing the taxpayer’s income from the business for the year in respect of the sale of breeding bees in the year

exceeds

(

b) the total of all amounts deducted under paragraph 20(1)(

n) in computing the taxpayer’s income from the business for the year in respect of an amount referred to in paragraph ( a );

is the total of all amounts deducted in computing the taxpayer’s income from the business for the year in respect of the acquisition of breeding bees; and

( a )

30% if the taxpayer’s breeding bee stock in respect of the business at the end of the year exceeds 70% of the taxpayer’s breeding bee stock in respect of the business at the beginning of the year, and

( b )

90% if the taxpayer’s breeding bee stock in respect of the business at the end of the year does not exceed 70% of the taxpayer’s breeding bee stock in respect of the business at the beginning of the year.

(4) The portion of subsection 80.3(5) of the Act before paragraph (

b) is replaced by the following:

Inclusion of deferred amount

(5) An amount deducted under subsection (4) or (4.1) in computing the income of a taxpayer for a particular taxation year from a farming business carried on in a region prescribed under those subsections may, to the extent that the taxpayer so elects, be included in computing the taxpayer’s income from the business for a taxation year ending after the particular taxation year, and is, except to the extent that the amount has been included under this subsection in computing the taxpayer’s income from the business for a preceding taxation year after the particular year, deemed to be income of the taxpayer from the business for the taxation year of the taxpayer that is the earliest of

(

a) the first taxation year beginning after the end of the period or series of continuous periods, as the case may be, for which the region is prescribed under those subsections,

(5) The portion of subsection 80.3(6) of the Act before paragraph (

a) is replaced by the following:

Subsections (2), (4) and (4.1) not applicable

(6) Subsections (2), (4) and (4.1) do not apply to a taxpayer in respect of a farming business for a taxation year

(6) Section 80.3 of the Act is amended by adding the following after subsection (6):

Measuring breeding bee stock

(7) In applying subsection (4.1) in respect of a taxation year, the unit of measurement used for estimating the quantity of a taxpayer’s breeding bee stock held in the course of carrying on a farming business at the end of the year is to be the same as that used for the beginning of the year.

(7) Subsections (1) to (6) apply to the 2014 and subsequent taxation years.

(1) Paragraph 81(1)(

c) of the Act is replaced by the following:

Ship or aircraft of non-residents

(

c) the income for the year of a non-resident person earned in Canada from international shipping or from the operation of aircraft in international traffic, if the country in which the person is resident grants substantially similar relief for the year to persons resident in Canada;

(2) Subsection (1) applies to taxation years that begin after July 12, 2013.

(1) Section 87 of the Act is amended by adding the following after subsection (8.2):

Anti-avoidance

(8.3) Subsection (8) does not apply in respect of a taxpayer’s shares of the capital stock of a predecessor foreign corporation that are exchanged for or become, on a foreign merger, shares of the capital stock of the new foreign corporation or the foreign parent corporation, if

(

a) the new foreign corporation is, at the time that is immediately after the foreign merger, a foreign affiliate of the taxpayer;

(

b) shares of the capital stock of the new foreign corporation are, at that time, excluded property (as defined in subsection 95(1)) of another foreign affiliate of the taxpayer; and

(

c) the foreign merger is part of a transaction or event or a series of transactions or events that includes a disposition of shares of the capital stock of the new foreign corporation, or property substituted for the shares, to

(

i) a person (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)( m )) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length immediately after the transaction, event or series, or

(ii)

a partnership a member of which is, immediately after the transaction, event or series, a person described in subparagraph (i).

(2) Subsection (1) applies to foreign mergers that occur after July 12, 2013.

(1) Subsection 90(8) of the Act is amended by striking out “and” at the end of paragraph ( b ), by adding “and” at the end of paragraph (

c) and by adding the following after paragraph ( c ):

(

d) subject to subsection (8.1), an upstream deposit owing to an eligible bank affiliate.

(2) Section 90 of the Act is amended by adding the following after subsection (8):

Upstream deposit — eligible bank affiliate

(8.1) For the purposes of this section, if a taxpayer is an eligible Canadian bank and an eligible bank affiliate of the taxpayer is owed, at any time in a particular taxation year of the affiliate or the immediately preceding taxation year, an upstream deposit,

(

a) the affiliate is deemed to make a loan to the taxpayer immediately before the end of the particular year equal to the amount determined by the following formula, where all amounts referred to in the formula are to be determined using Canadian currency:

A – B – C where A

is 90% of the average of all amounts each of which is, in respect of a calendar month that ends in the particular year, the greatest total amount at any time in the month of the upstream deposits owing to the affiliate,

is the lesser of

(

i) the amount, if any, by which the affiliate’s excess liquidity for the particular year exceeds the average of all amounts each of which is, in respect of a calendar month that ends in the particular year, the greatest total amount at any time in the month of eligible Canadian indebtedness owing to the affiliate, and

(ii)

the amount determined for A, and

is the amount, if any, by which the amount determined for A for the immediately preceding year exceeds the amount determined for B for the immediately preceding year; and

(

b) if the formula in paragraph (

a) would, in the absence of

section 257, result in a negative amount for the particular year,

(

i) the taxpayer is deemed to repay immediately before the end of the particular year — in an amount equal to the absolute value of the negative amount and in the order in which they arose — loans made by the affiliate under paragraph (

a) in a prior taxation year and not previously repaid, and

(ii)

the repayment is deemed to not be part of a series of loans or other transactions and repayments.

(3) Subsection 90(15) of the Act is amended by adding the following in alphabetical order:

eligible bank affiliate

filiale bancaire admissible

eligible bank affiliate has the same meaning as in subsection 95(2.43).

eligible Canadian bank

banque canadienne admissible

eligible Canadian bank has the same meaning as in subsection 95(2.43).

eligible Canadian indebtedness

dettes canadiennes admissibles

eligible Canadian indebtedness has the same meaning as in subsection 95(2.43).

excess liquidity

liquidités excédentaires

excess liquidity has the same meaning as in subsection 95(2.43).

upstream deposit

dépôt en amont

upstream deposit has the same meaning as in subsection 95(2.43).

(4) Subsections (1) to (3) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after February 27, 2014.

(1) The portion of subsection 93.1(1) of the Act before paragraph (

a) is replaced by the following:

Shares held by partnership

93.1

(1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2) and 20(12), sections 93 and 113, paragraph 128.1(1)( d ), (and any regulations made for the purposes of those provisions),

section 95 (to the extent that it is applied for the purposes of those provisions), subsection 95(2.2) and

section 126, if, based on the assumptions contained in paragraph 96(1)( c ), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(2) The portion of subsection 93.1(1) of the Act before paragraph ( a ), as enacted by subsection (1), is replaced by the following:

Shares held by partnership

93.1

(1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2), 20(12) and 39(2.1), sections 90, 93 and 113, paragraph 128.1(1)( d ), (and any regulations made for the purposes of those provisions),

section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)( g.04 ), subsection 95(2.2) and

(3) The portion of subsection 93.1(1) of the Act before paragraph ( a ), as enacted by subsection (2), is replaced by the following:

Shares held by partnership

93.1

section 212.3 and subsection 219.1(2), (and any regulations made for the purposes of those provisions),

section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)( g.04 ), subsection 95(2.2) and

(4) The portion of subsection 93.1(1) of the Act before paragraph ( a ), as enacted by subsection (3), is replaced by the following:

Shares held by partnership

93.1

(1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of a specified provision, if, based on the assumptions contained in paragraph 96(1)( c ), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(5) Section 93.1 of the Act is amended by adding the following after subsection (1):

Specified provisions for subsection (1)

(1.1) For the purposes of subsection (1), the specified provisions are

( a )

subsections (2), (5), 20(12) and 39(2.1), sections 90, 93, 93.3 and 113, paragraphs 128.1(1)( c.3 ) and ( d ),

section 212.3, subsection 219.1(2) and

section 233.4;

(

b) section 95 to the extent that

section is applied for the purposes of the provisions referred to in paragraph ( a );

(

c) any regulations made for the purposes of the provisions referred to in paragraph ( a ); and

( d )

paragraph 95(2)( g.04 ), subsection 95(2.2) and

section 126.

(6) Paragraph 93.1(2)(

a) of the Act is replaced by the following:

(

a) for the purposes of sections 93 and 113 and any regulations made for the purposes of those sections, each member of the partnership (other than another partnership) is deemed to have received the proportion of the partnership dividend that

(

i) the fair market value of the member’s interest held, directly or indirectly through one or more other partnerships, in the partnership at that time

is of

(ii)

the fair market value of all the interests in the partnership held directly by members of the partnership at that time;

(7) Paragraph 93.1(3)(

c) of the Act is replaced by the following:

( c )

subsections 39(2.1), 40(3.6) and 87(8.3).

(8) Section 93.1 of the Act is amended by adding the following after subsection (3):

Partnership deemed to be corporation

(4) For the purpose of applying clause 95(2)( a )(ii)(

D) in respect of an amount paid or payable by a partnership to a foreign affiliate, of a taxpayer, that is a member of the partnership or to another foreign affiliate of the taxpayer,

(

a) if, at any time, all the members (in this subsection referred to as “member affiliates”) of the partnership are foreign affiliates of the taxpayer,

(

i) the partnership is deemed to be, at that time in respect of the taxpayer and the member affiliates, a non-resident corporation without share capital, and

(ii)

all the membership interests in the partnership are deemed to be, at that time, equity interests in the corporation held by the member affiliates; and

(

b) if, at any time, all the member affiliates are resident in a particular country and the partnership does not carry on business outside the particular country, the partnership is deemed to be, at that time, resident in the particular country.

Computing FAPI in respect of partnership

(5) For the purpose of applying a relevant provision in respect of a foreign affiliate of a taxpayer resident in Canada, if at any time the taxpayer is a partnership of which a particular corporation resident in Canada, or a foreign affiliate of the particular corporation, is a member and if, based on the relevant assumptions, the particular corporation and the taxpayer would be related, then

(

a) a non-resident corporation that is, at that time, a foreign affiliate of the particular corporation is deemed to be, at that time, a foreign affiliate of the taxpayer; and

(

b) the taxpayer is deemed to have, at that time, a qualifying interest in respect of that foreign affiliate if the particular corporation has, at that time, a qualifying interest in respect of the non-resident corporation.

Relevant provisions and assumptions

(6) For the purposes of subsection (5),

(

a) the relevant provisions are

(

i) paragraph (

b) of the description of A in the definition foreign accrual property income in subsection 95(1),

(ii)

in determining whether a property of a foreign affiliate of a taxpayer is excluded property of the affiliate, the description of B in the definition foreign accrual property income in subsection 95(1),

(iii)

paragraphs 95(2)(

a) and ( g ), and

(iv)

subsections 95(2.2) and (2.21); and

(

b) the relevant assumptions are that

(

i) the partnership is a non-resident corporation having capital stock of a single class divided into 100 issued shares that each have full voting rights, and

(ii)

each member of the partnership (other than another partnership) owns, at any time, the proportion of the issued shares of that class that

(

A) the fair market value of the member’s interest held, directly or indirectly through one or more partnerships, in the partnership at that time

is of

(

B) the fair market value of all the interests in the partnership held directly by members of the partnership at that time.

(9) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999.

(10) Subsection (2) is deemed to have come into force on August 20, 2011.

(11) Subsection (3) is deemed to have come into force on March 29, 2012.

(12) Subsections (4) and (5) are deemed to have come into force on July 12, 2013. However, if a taxpayer elects under subsection (15), then in respect of the taxpayer, subsections (4) and (5) are deemed to have come into force on January 1, 2010 and subsection 93.1(1.1) of the Act, as enacted by subsection (5), is to be read

(

a) in respect of any time that is after 2009 and before August 20, 2011 as follows:

(1.1) For the purposes of subsection (1), the specified provisions are

( a )

subsections (2), (5) and 20(12), sections 93 and 113 and paragraph 128.1(1)( d );

(

b) section 95 to the extent that

section is applied for the purposes of the provisions referred to in paragraph ( a );

(

c) any regulations made for the purposes of the provisions referred to in paragraph ( a ); and

( d )

subsection 95(2.2) and

section 126.

(

b) in respect of any time that is after August 19, 2011 and before March 29, 2012 as follows:

(1.1) For the purposes of subsection (1), the specified provisions are

( a )

subsections (2), (5), 20(12) and 39(2.1), sections 90, 93 and 113 and paragraph 128.1(1)( d );

(

b) section 95 to the extent that

section is applied for the purposes of the provisions referred to in paragraph ( a );

(

c) any regulations made for the purposes of the provisions referred to in paragraph ( a ); and

( d )

paragraph 95(2)( g.04 ), subsection 95(2.2) and

section 126.

(

c) in respect of any time that is after March 28, 2012 and before July 12, 2013 as follows:

(1.1) For the purposes of subsection (1), the specified provisions are

( a )

subsections (2), (5), 20(12) and 39(2.1), sections 90, 93 and 113, paragraphs 128.1(1)( c.3 ) and ( d ),

section 212.3 and subsection 219.1(2);

(

b) section 95 to the extent that

section is applied for the purposes of the provisions referred to in paragraph ( a );

(

c) any regulations made for the purposes of the provisions referred to in paragraph ( a ); and

( d )

paragraph 95(2)( g.04 ), subsection 95(2.2) and

section 126.

(13) Subsection (6) applies to dividends received after November 1999.

(14) Subsection (7) and subsection 93.1(4) of the Act, as enacted by subsection (8), apply in respect of taxation years of a foreign affiliate of a taxpayer that end after July 12, 2013.

(15) Subsections 93.1(5) and (6) of the Act, as enacted by subsection (8), apply in respect of taxation years of foreign affiliates of a taxpayer that end after July 12, 2013.

However, if the taxpayer elects in writing under this subsection in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the day that an information return referred to in subsection 229(1) of the Income Tax Regulations is required (or would be required if the taxpayer were a Canadian partnership), pursuant to subsections 229(5) and (6) of the Income Tax Regulations , to be filed in respect of the fiscal period of the taxpayer that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then subsections 93.1(5) and (6) of the Act, as enacted by subsection (8), are deemed to have come into force on January 1, 2010.

(1) The Act is amended by adding the following after

section 93.1:

Definitions

93.2

(1) The

definitions in this subsection apply in this section.

equity interest

participation

equity interest , in a non-resident corporation without share capital, means any right, whether absolute or contingent, conferred by the non-resident corporation to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, revenue or income of the non-resident corporation, but does not include a right as creditor.

non-resident corporation without share capital

société non-résidente sans capital-actions

non-resident corporation without share capital means a non-resident corporation that, determined without reference to this section, does not have capital divided into shares.

Non-resident corporation without share capital

(2) For the purposes of this Act,

(

a) equity interests in a non-resident corporation without share capital that have identical rights and obligations, determined without reference to proportionate differences in all of those rights and obligations, are deemed to be shares of a separate class of the capital stock of the corporation;

(

b) the corporation is deemed to have 100 issued and outstanding shares of each class of its capital stock;

(

c) each person or partnership that holds, at any time, an equity interest in a particular class of the capital stock of the corporation is deemed to own, at that time, that number of shares of the particular class that is equal to the proportion of 100 that

(

i) the fair market value, at that time, of all the equity interests of the particular class held by the person or partnership

is of

(ii)

the fair market value, at that time, of all the equity interests of the particular class; and

(

d) shares of a particular class of the capital stock of the corporation are deemed to have rights and obligations that are the same as those of the corresponding equity interests.

Non-resident corporation without share capital

(3) For the purposes of

section 51, subsection 85.1(3),

section 86 and paragraph 95(2)( c ),

(

a) subject to paragraph ( b ), if at any time a taxpayer resident in Canada or a foreign affiliate of the taxpayer (in this subsection referred to as the “vendor”) disposes of capital property that is shares of the capital stock of a foreign affiliate of the taxpayer, or a debt obligation owing to the taxpayer by the affiliate, to — or exchanges the shares or debt for shares of the capital stock of — a non-resident corporation without share capital, that is immediately after that time a foreign affiliate of the taxpayer, in a manner that increases the fair market value of a class of shares of the capital stock of the non-resident corporation, the non-resident corporation is deemed to have issued, and the vendor is deemed to have received, new shares of the class as consideration in respect of the disposition or exchange; and

(

b) if the taxpayer elects under this paragraph and files the election in writing with the Minister on or before its filing-due date for the taxation year that includes the day on which the disposition or exchange occurs, paragraph (

a) does not apply to the disposition or exchange.

Definition of Australian trust

93.3

(1) In this section, Australian trust , at any time, means a trust in respect of which the following apply at that time:

(

a) in the absence of subsection (3), the trust would be described in paragraph (

h) of the definition exempt foreign trust in subsection 94(1);

(

b) the trust is resident in Australia;

(

c) the interest of each beneficiary under the trust is described by reference to units of the trust; and

(

d) the liability of each beneficiary under the trust is limited by the operation of any law governing the trust.

Conditions for subsection (3)

(2) Subsection (3) applies at any time to a taxpayer resident in Canada in respect of a trust if

(

a) a non-resident corporation is at that time beneficially interested in the trust;

(

b) the non-resident corporation is at that time a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest;

(

c) the trust is at that time an Australian trust;

(

d) the total fair market value at that time of all fixed interests (in this

section as defined in subsection 94(1)) of a class in the trust held by the non-resident corporation, or persons or partnerships that do not deal at arm’s length with the non-resident corporation, is at least 10% of the total fair market value at that time of all fixed interests of the class; and

(

e) unless the non-resident corporation first acquires a beneficial interest in the trust at that time, immediately before that time (referred to in this paragraph as the “preceding time”) subsection (3) applied

(

i) to the taxpayer in respect of the trust, or

(ii)

to a corporation resident in Canada, that at the preceding time did not deal at arm’s length with the taxpayer, in respect of the trust.

Australian trusts

(3) If this subsection applies at any time to a taxpayer resident in Canada in respect of a trust, the following rules apply at that time for the specified purposes:

(

a) the trust is deemed to be a non-resident corporation that is resident in Australia and not to be a trust;

(

b) each particular class of fixed interests in the trust is deemed to be a separate class of 100 issued shares, of the capital stock of the non-resident corporation, that have the same attributes as the interests of the particular class;

(

c) each beneficiary under the trust is deemed to hold the number of shares of each separate class described in paragraph (

b) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class;

(

d) the non-resident corporation is deemed to be controlled by the taxpayer resident in Canada — a foreign affiliate of which is referred to in paragraph (2)(

b) and is beneficially interested in the trust — that has the greatest equity percentage in the non-resident corporation;

(

e) a particular foreign affiliate of the taxpayer in which the taxpayer has a direct equity percentage (as defined in subsection 95(4)) at a particular time, and that is not a controlled foreign affiliate of the taxpayer at that time, is deemed to be a controlled foreign affiliate of the taxpayer at that time if, at that time,

(

i) the particular affiliate has an equity percentage (as defined in subsection 95(4)) in the foreign affiliate referred to in paragraph (2)( b ), or

(ii)

the particular affiliate is the foreign affiliate referred to in paragraph (2)( b ); and

(

f) section 94.2 does not apply to the taxpayer in respect of the trust.

Specified purposes

(4) For the purposes of subsection (3), the specified purposes are

(

a) the determination, in respect of an interest in an Australian trust, of the Canadian tax results (as defined in subsection 261(1)) of the taxpayer resident in Canada referred to in subsection (3) for a taxation year in respect of shares of the capital stock of a foreign affiliate of the taxpayer;

(

b) the filing obligations of the taxpayer under

section 233.4; and

(

c) if the taxpayer is a corporation resident in Canada, the application of

section 212.3 in respect of an investment (as defined in subsection 212.3(10)) by the taxpayer.

Mergers

(5) For the purposes of this section,

(

a) if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; and

(

b) if there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.

(2) Section 93.2 of the Act, as enacted by subsection (1), applies in respect of taxation years of non-resident corporations that end after 1994 except that

(

a) if a taxpayer elects in writing under this subsection and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then

section 93.2 of the Act, as enacted by subsection (1), applies, in respect of the taxpayer, in respect of taxation years of non-resident corporations that end after July 12, 2013;

(

b) in respect of dispositions that occur before July 12, 2013,

section 93.2 of the Act, as enacted by subsection (1), is to be read without reference to its subsection (3); and

(

c) in respect of dispositions that occur after July 11, 2013 and before October 10, 2014, the reference in paragraph 93.2(3)( b ), as enacted by subsection (1), to the taxpayer’s “filing-due date” is to be read as the filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent.

(3) Section 93.3 of the Act, as enacted by subsection (1), is deemed to have come into force on July 12, 2013. However, if a corporation resident in Canada and each other corporation resident in Canada that, at any time after 2005 and before July 12, 2013, was both related to the corporation and had a foreign affiliate (determined as if the reference in paragraph (

b) of the definition equity percentage in subsection 95(4) of the Act to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”) that was beneficially interested in an Australian trust (as defined in subsection 93.3(1) of the Act, as enacted by subsection (1)), jointly elect in writing under this subsection and file the election with the Minister of National Revenue on or before the day that is one year after the day on which this Act receives royal assent, then in respect of each corporation that has elected under this subsection,

section 93.3 of the Act, as enacted by subsection (1),

(

a) is deemed to have come into force on January 1, 2006; and

(

b) before July 12, 2013 is to be read as if it contained the following after subsection (5):

(6) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of this section, if, based on the assumptions contained in paragraph 96(1)( c ), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(

a) the fair market value of the member’s interest in the partnership at that time

is of

(

b) the fair market value of all members’ interests in the partnership at that time.

(1) The

definitions connected contributor and resident contributor in subsection 94(1) of the Act are replaced by the following:

connected contributor

contribuant rattaché

connected contributor , to a trust at a particular time, means a contributor to the trust at the particular time, other than a person all of whose contributions to the trust made at or before the particular time were made at a non-resident time of the person.

resident contributor

contribuant résident

resident contributor , to a trust at any time, means a person that is, at that time, resident in Canada and a contributor to the trust, but — if the trust was created before 1960 by a person who was non-resident when the trust was created — does not include an individual (other than a trust) who has not, after 1959, made a contribution to the trust.

(2) Paragraph 94(4)(

b) of the Act is replaced by the following:

( b )

subsections (8.1) and (8.2), paragraph (14)( a ), subsections 70(6) and 73(1), the definition Canadian partnership in subsection 102(1), paragraph 107.4(1)( c ), the definition qualified disability trust in subsection 122(3) and paragraph (

a) of the definition mutual fund trust in subsection 132(6);

(3) Subparagraph 94(11)( b )(ii) of the Act is replaced by the following:

(ii)

would be deemed to be resident in Canada immediately before that time because of paragraph (3)(

a) if this section, as it read in its application to the 2013 taxation year, were read without reference to paragraph (

a) of the definition connected contributor in subsection (1) and paragraph (

a) of the definition resident contributor in that subsection,

(4) Subsections (1) and (3) apply to taxation years that end after February 10, 2014, except that those subsections do not apply in respect of a trust to taxation years that end before 2015 if the following conditions are satisfied:

(

a) no contributions are made to the trust after February 10, 2014 and before 2015; and

(

b) if the trust were to have a particular taxation year that ended after 2013 and before February 11, 2014,

(

i) the trust would be non-resident for the purpose of computing its income for the particular year, and

(ii)

if the

definitions connected contributor and resident contributor in subsection 94(1) of the Act were read for the particular year without reference to their paragraphs ( a ), the trust would be resident in Canada for the purpose of computing its income for the particular year.

(5) Subsection (2) applies to the 2016 and subsequent taxation years.

(1) The portion of subsection 94.2(1) of the Act before paragraph (

a) is replaced by the following:

Investments in non-resident commercial trusts

94.2

(1) Subsection (2) applies to a beneficiary under a trust, and to any particular person of which any such beneficiary is a controlled foreign affiliate, at any time if

(2) Subsection (1) applies to taxation years that end after February 10, 2014, except that it does not apply in respect of a trust to taxation years that end before 2015 if the following conditions are satisfied:

(

a) no contributions are made to the trust after February 10, 2014 and before 2015; and

(

b) if the trust were to have a particular taxation year that ended after 2013 and before February 11, 2014,

(

i) the trust would be non-resident for the purpose of computing its income for the particular year, and

(ii)

if the

(1) The definition foreign accrual tax in subsection 95(1) of the Act is replaced by the following:

foreign accrual tax

impôt étranger accumulé

foreign accrual tax applicable to any amount included under subsection 91(1) in computing a taxpayer’s income for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),

(

a) the portion of any income or profits tax that may reasonably be regarded as applicable to that amount and that is paid by

(

i) the particular affiliate,

(ii)

another foreign affiliate (in paragraph (

b) referred to as the “shareholder affiliate”) of the taxpayer where

(

A) the other affiliate has an equity percentage in the particular affiliate,

(

B) the income or profits tax is paid to a country other than Canada, and

(

C) the other affiliate, and not the particular affiliate, is liable for that tax under the laws of that country, or

(iii)

another foreign affiliate of the taxpayer in respect of a dividend received, directly or indirectly, from the particular affiliate, if that other affiliate has an equity percentage in the particular affiliate, and

(

b) any amount prescribed in respect of the particular affiliate or the shareholder affiliate, as the case may be, to be foreign accrual tax applicable to that amount;

(2) The definition non-qualifying country in subsection 95(1) of the Act is replaced by the following:

non-qualifying country

pays non admissible

non-qualifying country , at any time, means a country or other jurisdiction

(

a) with which Canada neither has a tax treaty at that time nor has, before that time, signed an agreement that will, on coming into effect, be a tax treaty,

( a.1 )

for which, if the time is after February 2014, the Convention on Mutual Administrative Assistance in Tax Matters — concluded at Strasbourg on January 25, 1988, as amended from time to time by a protocol, or other international instrument, as ratified by Canada — is at that time not in force and does not have effect,

(

b) with which Canada does not have a comprehensive tax information exchange agreement that is in force and has effect at that time, and

(

c) with which Canada has, more than 60 months before that time, either

(

i) begun negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction), or

(ii)

sought, by written invitation, to enter into negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction);

(3) Paragraph (

a) of the description of H in the definition foreign accrual property income in subsection 95(1) of the Act is replaced by the following:

(

a) if the affiliate was a member of a partnership at the end of the fiscal period of the partnership that ended in the year and the partnership received a dividend at a particular time in that fiscal period from a corporation that would be, if the reference in subsection 93.1(1) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, a foreign affiliate of the taxpayer for the purposes of sections 93 and 113 at that particular time, then the portion of the amount of that dividend that is included in the value determined for A in respect of the affiliate for the year and that would be, if the reference in subsection 93.1(2) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, deemed by paragraph 93.1(2)(

a) to have been received by the affiliate for the purposes of sections 93 and 113, and

(4) Section 95 of the Act is amended by adding the following after subsection (1):

British Virgin Islands

(1.1) For the purposes of paragraph (

b) of the definition non-qualifying country in subsection (1), the British Overseas Territory of the British Virgin Islands is deemed to have a comprehensive tax information exchange agreement with Canada that is in force and has effect after 2013 and before March 11, 2014.

(5) Subparagraph 95(2)( a )(

i) of the Act is replaced by the following:

(

i) the income or loss

(

A) is derived by the particular foreign affiliate from activities of the particular foreign affiliate, or of a particular partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the particular partnership that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by

(

I) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year,

(II)

a life insurance corporation that is resident in Canada throughout the year and that is

the taxpayer,

a person who controls the taxpayer,

a person controlled by the taxpayer, or

a person controlled by a person who controls the taxpayer,

(III)

the particular foreign affiliate or a partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the partnership, or

(IV)

a partnership of which another foreign affiliate of the taxpayer, in respect of which the taxpayer has a qualifying interest throughout the year, is a member, to the extent that the activities occur while the other affiliate is a qualifying member of the partnership, and

(

B) if any of subclauses (A)(I), (II) and (IV) applies, would be included in computing the amount prescribed to be the earnings or loss, from an active business carried on in a country other than Canada, of

(

I) that other foreign affiliate referred to in subclause (A)(

I) or (IV), if the income were earned by it, or

(II)

the life insurance corporation referred to in subclause (A)(II), if that life insurance corporation were a foreign affiliate of the taxpayer and the income were earned by it,

(6) Clause 95(2)( a )(ii)(

D) of the Act is amended by adding “and” at the end of subclause (III) and by replacing subclauses (IV) and (

V) with the following:

(IV)

in respect of each of the second affiliate and the third affiliate, for each of their taxation years (each of which is referred to in this subclause as a “relevant taxation year”) that end in the year, either

that affiliate is subject to income taxation in a country other than Canada in that relevant taxation year, or

the members or shareholders of that affiliate (which, for the purposes of this sub-subclause, includes a person that has, directly or indirectly, an interest, or for civil law a right, in a share of the capital stock of, or in an equity interest in, the affiliate) at the end of that relevant taxation year are subject to income taxation in a country other than Canada on, in aggregate, all or substantially all of the income of that affiliate for that relevant taxation year in their taxation years in which that relevant taxation year ends,

(7) The portion of subparagraph 95(2)( a.1 )(ii) of the English version of the Act before clause (

A) is replaced by the following:

(ii)

the property was not

(8) Subparagraph 95(2)( a.1 )(ii) of the Act is amended by striking out “nor” at the end of clause (A), by adding “or” at the end of clause (

B) and by adding the following after clause (B):

(

C) an indebtedness, or a lease obligation, of a person resident in Canada or in respect of a business carried on in Canada, that was purchased and sold by the affiliate on its own account,

(9) The portion of paragraph 95(2)( a.1 ) of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

unless more than 90% of the gross revenue of the affiliate for the year from the sale of property is derived from the sale of such property (other than a property described in subparagraph (ii) the cost of which to any person is a cost referred to in subparagraph (

i) or a property the income from the sale of which is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) to persons with whom the affiliate deals at arm’s length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm’s length for sale to persons with whom the affiliate deals at arm’s length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,

(10) Subsection 95(2) of the Act is amended by adding the following after paragraph ( a.2 ):

( a.21 )

for the purposes of paragraph ( a.2 ), one or more risks insured by a foreign affiliate of a taxpayer that, if this Act were read without reference to this paragraph, would not be risks in respect of a person, property or business described in any of subparagraphs ( a.2 )(

i) to (iii) (in this paragraph referred to as the “foreign policy pool”) are deemed to be risks in respect of a person resident in Canada if

(

i) the affiliate, or a person or partnership that does not deal at arm’s length with the affiliate, enters into one or more agreements or arrangements in respect of the foreign policy pool,

(ii)

the affiliate’s risk of loss or opportunity for gain or profit in respect of the foreign policy pool, in combination with its risk of loss or opportunity for gain or profit in respect of the agreements or arrangements, can reasonably be considered to be — or could reasonably be considered to be if the affiliate had entered into the agreements or arrangements entered into by the person or partnership — determined, in whole or in part, by reference to one or more criteria in respect of one or more risks insured by another person or partnership (in this paragraph referred to as the “tracked policy pool”), which criteria are

(

A) the fair market value of the tracked policy pool,

(

B) the revenue, income, loss or cash flow from the tracked policy pool, or

(

C) any other similar criteria, and

(iii)

10% or more of the tracked policy pool consists of risks in respect of a person, property or business described in any of subparagraphs ( a.2 )(

i) to (iii);

( a.22 )

if the conditions in paragraph ( a.21 ) are satisfied in respect of a foreign affiliate of a taxpayer, or a foreign affiliate of another taxpayer if that other taxpayer does not deal at arm’s length with the taxpayer, and a particular foreign affiliate of the taxpayer, or a partnership of which the particular affiliate is a member, has entered into one or more agreements or arrangements described in that paragraph,

(

i) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate to the extent that those activities can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph ( a.21 )(ii), and

(ii)

any income of the particular affiliate from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;

(11) The portion of paragraph 95(2)( a.3 ) of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

unless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations (other than excluded revenue or revenue that is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm’s length and, where this paragraph applies to include income of the affiliate for the year in the income of the affiliate from a business other than an active business,

(12) The portion of clause 95(2)( b )(ii)(

B) of the Act before subclause (

I) is replaced by the following:

(

B) a relevant person who does not deal at arm’s length with

(13) Subparagraph 95(2)( l )(iv) of the Act is amended by striking out “or” at the end of clause (B), by adding “or” at the end of clause (

C) and by adding the following after clause (C):

(

D) a partnership each member of which is a corporation described in any of clauses (

A) to (C);

(14) The portion of paragraph 95(2)(

n) of the Act before subparagraph (

i) is replaced by the following:

(

n) in applying paragraphs (

a) and ( g ), paragraph (

b) of the description of A in the formula in the definition foreign accrual property income in subsection (1), subsections (2.2), (2.21) and 93.1(5) and paragraph (

d) of the definition exempt earnings , and paragraph (

c) of the definition exempt loss , in subsection 5907(1) of the Income Tax Regulations , a non-resident corporation is deemed to be, at any time, a foreign affiliate of a particular corporation resident in Canada, and a foreign affiliate of the particular corporation in respect of which the particular corporation has a qualifying interest, if at that time

(15) Subparagraph 95(2)( u )(

i) of the Act, as it read immediately before it was repealed by subsection 70(21) of the Technical Tax Amendments Act, 2012 , is replaced by the following:

(

i) the entity is deemed to be a member of the other partnership for the purposes of

(

A) subparagraph (ii),

(

B) applying the reference, in paragraph ( a ), to “a member” of a partnership,

(

C) paragraphs ( a.1 ) to ( b ), ( g.03 ), ( j.1 ) to ( k.1 ) and ( o ),

(

D) paragraphs (

b) and (

c) of the definition investment business in subsection (1),

(

E) the definition taxable Canadian business in subsection (1), and

(

F) subsection 93.1(2), and

(16) Paragraph 95(2)(

u) of the Act, as amended by subsection (15), is repealed.

(17) Section 95 of the Act is amended by adding the following after subsection (2.1):

Rule for definition investment business

(2.11) A taxpayer or a foreign affiliate of the taxpayer, as the case may be, is deemed not to have established that the conditions in subparagraph ( a )(

i) of the definition investment business in subsection (1) have been satisfied throughout a period in a particular taxation year of the affiliate unless

(

a) throughout the period the taxpayer is

(

i) a particular corporation resident in Canada

(

A) that is a bank listed in

Schedule I to the Bank Act , a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities that is a registered securities dealer, the business activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions, a similar regulating authority of a province or an authority of, or approved by, a province to regulate traders or dealers in securities or commodities, and

(

B) that is not a corporation the fair market value of any share of the capital stock of which is determined primarily by reference to one or more of the fair market value of, any revenue, income or cash flow from, any profits or gains from the disposition of, or any other similar criteria in respect of, property the fair market value of which is less than 90% of the fair market value of all of the property of the corporation,

(ii)

a corporation resident in Canada

(

A) of which

(

I) the particular corporation described in subparagraph (

i) is a subsidiary controlled corporation, or

(II)

a corporation described in this subparagraph is a subsidiary wholly-owned corporation, and

(

(iii)

a corporation resident in Canada each of the shares of the capital stock of which is owned by a corporation that is described in this subparagraph or in subparagraph (

i) or (ii), or

(iv)

a partnership

(

A) each member of which is a corporation described in any of subparagraphs (

i) to (iii), or another partnership described in this subparagraph, or

(

B) in respect of which the following conditions are satisfied:

(

I) the partnership is a registered securities dealer, the business activities of which are subject to the supervision of a regulating authority described in clause ( a )(i)(A), and

(II)

the share of the total income or loss of the partnership of a majority-interest partner of the partnership that is either a corporation resident in Canada or a Canadian partnership — together with the share of each corporation resident in Canada that is affiliated with the majority-interest partner — is equal to all or substantially all of the total income or loss of the partnership; and

(

b) either

(

i) throughout the period the particular corporation described in subparagraph ( a )(

i) has, or is deemed for certain purposes to have, $2 billion or more of equity

(

A) if the particular corporation is a bank, under the Bank Act ,

(

B) if the particular corporation is a trust company, under the Trust and Loan Companies Act , or

(

C) if the particular corporation is an insurance corporation, under the Insurance Companies Act , or

(ii)

more than 50% of the total of all amounts each of which is an amount of taxable capital employed in Canada (within the meaning assigned by

Part I.3) of the taxpayer — or of a corporation resident in Canada that is affiliated with the taxpayer — for the taxation year of the taxpayer or of the affiliated corporation, as the case may be, that ends in the particular year is attributable to a business carried on in Canada, the activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions, a similar regulating authority of a province or an authority of, or approved by, a province to regulate traders or dealers in securities or commodities.

(18) Section 95 of the Act is amended by adding the following after subsection (2.3):

Application of paragraphs (2)( a.1 ) and ( a.3 )

(2.31) Paragraphs (2)( a.1 ) and ( a.3 ) do not apply to a controlled foreign affiliate (for the purposes of

section 17) of an eligible Canadian bank (as defined in subsection (2.43)) in respect of activities carried out to earn income from a property, other than a specified property of the affiliate, if

(

a) the affiliate sells the property, or performs services as an agent in relation to a purchase or sale of the property, and it is reasonable to conclude that the cost to any person of the property is relevant in computing the income from

(

i) a business carried on by the bank or a person resident in Canada with whom the bank does not deal at arm’s length, or

(ii)

a business carried on in Canada by a non-resident person with whom the bank does not deal at arm’s length;

(

b) the property has a readily available fair market value and

(

i) is listed on a recognized stock exchange,

(ii)

would be a mark-to-market property (as defined in subsection 142.2(1)) of the bank if it were owned by the bank, or

(iii)

is a debt obligation owing by the bank that would be a mark-to-market property (as defined in subsection 142.2(1)) of the affiliate if

(

A) the affiliate were the taxpayer referred to in that definition, and

(

B) the definition specified debt obligation in subsection 142.2(1) were read without reference to its paragraph ( d );

(

c) the purchase and sale of the property by the affiliate, or services performed by the affiliate as agent in respect of the purchase or sale, are made

(

i) on terms and conditions that are substantially the same as the terms and conditions of similar purchases or sales of, or services performed in respect of the purchase or sale of, such property by persons dealing at arm’s length,

(ii)

in the course of a business

(

A) that regularly includes trading or dealing in securities principally with persons with whom the affiliate deals at arm’s length, and

(

B) that is principally carried on through a permanent establishment in a country other than Canada, and

(iii)

for the purpose of enabling the purchase or sale of the property by a particular person who deals at arm’s length with the affiliate and the bank; and

(

d) the affiliate is a foreign bank or

Document details

Collection	Annual Statutes
Citation	2014, c. 39
Type	statute
Volume / chapter	2014, c. 39
Language	en
Format	xml
Source	JUSTICE_LAWS
Identifier	d847f1e6f062f4cd008334c04971a3e8bedb1635

Source file is stored in the law ingest library (xml).